Elon Musk must face a fraud lawsuit after a U.S. judge ruled that shareholders sufficiently alleged that he defrauded them by delaying the disclosure of his Twitter stake, now known as X. U.S. District Judge Andrew Carter in Manhattan rejected Musk’s attempt to dismiss the case, which was brought by former Twitter shareholders, including the Oklahoma Firefighters Pension and Retirement System.
The lawsuit claims that Musk’s delayed SEC filing on his initial 5% Twitter stake, which was not disclosed until 11 days after the March 24, 2022, deadline, caused shareholders to sell their stocks at artificially low prices, ultimately costing them more than $200 million. Musk’s eventual filing revealed that he had acquired a 9.2% stake, which sent Twitter shares up by 27% in early April 2022.
Judge Carter found that Musk’s filing and his tweets about potentially creating a Twitter rival or altering the platform’s logo could have misled investors into thinking Musk was making a “passive” investment and did not intend to take over the company. While some claims were dismissed, the case will proceed to explore whether Musk’s actions were fraudulent.
